On Sunday, US President Donald Trump tweeted, “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”
As everyone knows by now, last month the US Department of Commerce levied a 7-year ban on American exports to ZTE, a move that has caused many of the company’s businesses to collapse, creating chaos for both countries and the world. The punishment came after the US accused the Chinese company of providing false information.
The reasons behind punishing ZTE have aroused suspicion from the international community as many feel it was a card dealt by the US in the recent trade scuffle.
Regardless of the reasons for the ZTE sanctions, the recent tweet from President Trump is welcoming. A significant number of US-made components can be found in ZTE products including chips, and it would be too difficult to find a quick alternative source. ZTE, a company with 80,000 employees, could avoid suspending business operations if Trump’s decision is executed quickly.
It is worth pointing out that restoring ZTE supplies not only benefits the Chinese company, but also US suppliers as it restores vendor reputation.
ZTE’s legal battle with the US has dragged on for too long. The company’s chances of winning an appeal against the US Department of Justice (DOJ) or Department of Commerce are slim. However, it does not make sense to issue a death sentence over a dispute regarding the bonuses of a dozen employees.
ZTE has been major purchaser of US upstream semiconductor equipment and components. Sanctioning the company means US-related companies can expect significant damages and profit loss. The Washington measure will have profound consequences in disturbing a sense of security among their foreign partners.
The case with ZTE functions as a message to the outside world as international companies now run the risk of being punished by the US over tiny disputes, without being given a chance to defend themselves.
If the sanctions against ZTE are a deliberate act warning China of a Sino-US trade war, some foreign companies might be worried about their safety in the US. For them, working with US companies has been redefined as they could become a scapegoat whenever a large conflict emerges between them.
Implementing the sanctions against ZTE will inevitably deal a heavy blow to the development of the global industrial marketplace. There is practically no other company the size of ZTE that relies on US-made parts, and US companies have benefited from this globalized supply chain.
One important factor that has caused the underdevelopment of China’s chip industry is its reliance on US supplies. The “death sentence” has shaken Chinese society so much that it has been forced to make the painful realization that China must develop its semiconductor industry. It is without uncertainty that the US ban will serve as the motivation behind China’s advancement within this sector.
President Trump’s decision couldn’t have arrived at a better time. Many Chinese saw ZTE’s ordeal as the result of evil wrongdoing carried out by the US as was the speculation among international businesses. This latest development offers a new angle for analyzing US intentions.
Whether ensconced with trade disputes or conflicts among other companies, it is sincerely hoped for that major issues can be resolved fairly without having to utilize extreme measures. As the largest economy in the world, the US needs to contribute to its stability.
Economic and trade partners should not have to feel a deep sense of unease when working with the US. We expect President Trump to follow through with his Twitter announcement quickly, and it shouldn’t be just another card in the game. The situation with ZTE is about credibility and nothing more.